Exhibit 10.2
[HOMEWOOD SUITES LOGO]
ATLANTA-GALLERIA/CUMBERLAND, GA
PROMUS HOTELS, INC
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
HOMEWOOD SUITES
LICENSE AGREEMENT
DATED OCTOBER 5, 1999 BETWEEN PROMUS HOTELS, INC., A DELAWARE CORPORATION
("LICENSOR"), AND APPLE SUITES MANAGEMENT, INC., A VIRGINIA CORPORATION
("LICENSEE"), WHOSE ADDRESS IS 306 EAST MAIN STREET, RICHMOND, VIRGINIA 23219.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name
"Homewood Suites" (the "System"). High standards established by Licensor
are the essence of the System. Future investments may be required of
Licensee under this License Agreement ("Agreement"). Licensee has
independently investigated the risks of the business to be operated
hereunder, including current and potential market conditions, competitive
factors and risks, has read Licensor's "Franchise Offering Circular," and
has made an independent evaluation of all such facts. Aware of the relevant
facts, Licensee desires to enter into this Agreement in order to obtain a
license to use the System in the operation of a Homewood Suites hotel
located at 3200 COBB PARKWAY, SW, ATLANTA, GEORGIA 30339 (the "Hotel")
subject to the terms of this Agreement.
A. THE HOTEL. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit,
parking and other areas from time to time located on the site approved
for the Hotel and acknowledged by Licensor in anticipation of the
execution of this Agreement, or located on any land from time to time
approved by Licensor for additions, signs or other facilities. No
change in the number of approved guest suites ("Guest Suites")
reflected on Attachment B (the "Rider") and no other significant
change in the Hotel may be made without Licensor's prior approval.
Redecoration and minor structural changes that comply with Licensor's
standards and specifications will not be considered significant.
Licensee represents that it is entitled to possession of the Hotel
during the entire License Term without restrictions that would
interfere with anything contemplated in this Agreement.
B. THE SYSTEM. The System is composed of elements, as designated from
time to time by Licensor, designed to identify "Homewood Suites
hotels" to the consuming public and/or to contribute to such
identification and its association with quality standards. The System
at present includes the service mark "Homewood Suites" and such other
service marks and such copyrights, trademarks and similar property
rights as may be designated from time to time by Licensor to be part
of the System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and materials; the
furnishing of training programs and materials, standards,
specifications and policies for construction, furnishing, operation,
appearance and service of the Hotel, and other requirements as stated
or referred to in this Agreement and from time to time in the Manual
(as defined herein) or in other communications to Licensee; and
programs for inspecting the Hotel and consulting with
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Licensee. Licensor may add elements to the System or modify, alter or
delete elements of the System (including the trade name and/or brand
name of the Hotel) at its sole discretion from time to time. Licensee
is only authorized to use "Homewood Suites" service marks and
trademarks at or in connection with the Hotel.
C. THE MANUAL. Licensee acknowledges the receipt of a current Homewood
Suites Standards Manual ("Manual"). The Manual contains, among other
matters, minimum standards and requirements for constructing,
equipping, furnishing, supplying, operating, maintaining and marketing
the Hotel. Licensor shall have the right to change the Manual from
time to time and Licensee agrees to abide by the Manual as changed.
The Manual shall at all times remain the sole property of Licensor.
Licensee shall use all reasonable efforts to maintain the
confidentiality of the Manual. Licensee shall not make or distribute
copies of the Manual or any portion thereof.
D. APPLICATION OF MANUAL. All hotels operated within the System will be
subject to the Manual, as it may from time to time be modified or
revised by Licensor. Licensor may, in its sole discretion, grant
limited exceptions from compliance with the Manual which may be made
based on local conditions or special circumstances. Each material
change in the Manual will be explained in writing to Licensee at least
30 days before it goes into effect. Licensee is responsible for the
costs of implementing all changes required because of modification to
the Manual.
Licensor may require that particular models or brands of furniture,
fixtures, equipment, food, and other items (collectively, the
"Supplies") be used in the operation of the Hotel or be purchased from
Licensor or from a source designated by Licensor. Otherwise, Licensee
may purchase all Supplies from any source as long as the standards and
specifications in the Manual are met, which standards and
specifications may be changed by Licensor from time to time. Licensee
will be responsible for the costs, if any, associated with the
purchase of Supplies or changing brands, models or sources of supply.
2. GRANT OF LICENSE.
Licensor hereby grants to Licensee a nonexclusive license (the "License")
to use the System only at the Hotel, only in connection with the operation
of a Homewood Suites hotel, only in accordance with this Agreement and only
during the "License Term" beginning with the date hereof and terminating as
provided in Paragraph 13. The License applies to the location of the Hotel
specified herein and no other. This Agreement does not limit Licensor's
right, or the rights of any parent, subsidiary, division or affiliate of
Licensor ("Entities"), to use or license to others the System or any part
thereof or to engage in or license any business activity at any other
location. Licensee acknowledges that Licensor and its Entities are and may
in the future be engaged in other business activities including activities
involving transient lodging and related activities which may be or may be
deemed to be competitive with the System; that facilities, programs,
services and/or personnel used in connection with the System may also be
used in connection with such other business activities of Licensor and its
Entities; and that Licensee is acquiring no rights hereunder other than the
non-exclusive right to use the System in connection with a Homewood Suites
hotel as specifically defined herein in accordance with the terms of this
Agreement.
3. LICENSOR'S RESPONSIBILITIES.
A. TRAINING. During the License Term, Licensor will specify required and
optional training programs and provide these programs at various
locations. Licensee may be charged for (i) required training services
and materials and (ii) for optional training services and materials if
provided to Licensee. Travel, lodging and other expenses of Licensee
and its employees will be borne by Licensee.
B. RESERVATION SERVICES. During the License Term, so long as Licensee is
in full compliance with the obligations set forth in this Agreement,
Licensor will afford Licensee access to reservation services for the
Hotel.
C. CONSULTATION. Licensor will, from time to time at Licensor's sole
discretion, make available to Licensee consultation and advice in
connection with operations, facilities and marketing. Licensor
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shall have the right to establish fees in advance for its advice and
consultation on a project-by-project basis.
D. ARRANGEMENTS FOR MARKETING, ETC. Licensor will use the
Marketing/Reservation Contribution for costs associated with
advertising, promotion, publicity, market research and other marketing
programs and related activities, including reservation programs and
services. Licensor may enter into arrangements for development,
marketing, operations, administrative, technical and support
functions, facilities, programs, services and/or personnel with any
other entity and may use any facilities, programs, services and/or
personnel used in connection with the System in connection with any
business activities of its Entities. Licensor is not obligated to
expend funds for marketing or reservation services in excess of the
amounts received from Licensees using the System. Licensor and its
designees shall have no obligation in administering any marketing and
reservation activities to make expenditures for Licensee which are
equivalent or proportionate to Licensee's payments, or to ensure that
any particular hotel benefits directly or proportionately from such
expenditures.
E. INSPECTIONS/COMPLIANCE ASSISTANCE. Licensor has the right to inspect
the Hotel at any time, with or without notice to Licensee, to
determine if the Hotel is in compliance with the standards and rules
of operation set forth in the Manual. If the Hotel fails to comply
with such standards and rules of operation, Licensor may, at its
option and at Licensee's cost, require an action plan to correct the
deficiencies. Licensee must then take all steps necessary to correct
any deficiencies within the times established by Licensor. Licensor's
approval of an action plan does not waive any rights it may have under
this Agreement nor does it relieve Licensee of any obligations under
this Agreement.
4. PROPRIETARY RIGHTS.
A. OWNERSHIP OF THE SYSTEM. Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's (or its affiliates', as the
case may be) unrestricted and exclusive ownership of the System and
any element(s) or component(s) thereof, and acknowledges that Licensor
has the sole right to grant licenses to use all or any element(s) or
component(s) of the System. Licensee specifically agrees and
acknowledges that Licensor (or its affiliates) is the owner of all
right, title and interest in and to the service mark "Homewood
Suites", its distinguishing characteristics, trade names, service
marks, trademarks, logos, copyrights, slogans, etc., and all other
marks associated with the System ("Marks") together with the goodwill
symbolized thereby and that Licensee will not contest directly or
indirectly the validity or ownership of the Marks either during the
term of this Agreement or at any time thereafter. All improvements and
additions whenever made to or associated with the System by the
parties to this Agreement or anyone else, and all service marks,
trademarks, copyrights, and service mark and trademark registrations
at any time used, applied for or granted in connection with the
System, and all goodwill arising from Licensee's use of the Marks
shall inure to the benefit of and become the property of Licensor (or
its applicable affiliate). Upon expiration or termination of this
Agreement, no monetary amount shall be assigned as attributable to any
goodwill associated with Licensee's use of the System or any
element(s) or component(s) of the System including the name or Marks.
B. USE OF NAME. Licensee will not use the word "Homewood" or "Homewood
Suites" or any similar word(s) in its corporate, partnership, business
or trade name, or in any Internet related name (including a domain
name) except as provided in this Agreement or the Manual, nor
authorize or permit such word(s) to be used by anyone else.
5. TRADEMARK AND SERVICE MARK.
A. TRADEMARK DISPUTES. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning use of
all or any part of the System, and Licensee will, at its reasonable
expense, extend its full cooperation to Licensor in all such matters.
All recoveries made as a result of disputes with third parties
regarding use of the System or any part thereof shall be for the
account of Licensor. Licensor need not initiate suit against alleged
imitators or infringers and may settle any dispute by grant of a
license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers or any other suit
or proceeding to enforce or protect the System.
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B. PROTECTION OF NAMES AND MARKS. Both parties will make every effort
consistent with the foregoing to protect and maintain the Marks and
name "Homewood Suites" and its distinguishing characteristics as
standing for the System and only the System. Licensee agrees to
execute any documents deemed necessary by Licensor or its counsel to
obtain protection for Licensor's Marks or to maintain their continued
validity and enforceability. Licensee agrees to use such names and
Marks only in connection with the operation of a Homewood Suites hotel
and in the manner authorized by Licensor. Licensee acknowledges that
any unauthorized use of the names or Marks shall constitute
infringement of Licensor's rights. Licensee must notify Licensor
immediately, in writing, of any infringement or challenge to
Licensee's use of the Marks or of any unauthorized use or possible
misuse of Licensor's Marks or Licensor's proprietary information.
6. LICENSEE'S RESPONSIBILITIES.
A. OPERATIONAL AND OTHER REQUIREMENTS. During the License Term, Licensee
will:
(1) promptly pay to Licensor all amounts due Licensor and its
Entities as royalties or fees or for goods or services purchased by
Licensee;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day, except as
otherwise permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor which may be
from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that either must or
may be used, promoted or offered at the Hotel;
(b) use, display, style and type of signage;
(c) directory and reservation service listings of the
Hotel;
(d) training of persons to be involved in the operation of
the Hotel;
(e) participation in all marketing, reservation service,
advertising, training and operating programs designated
by Licensor as System-wide (or area-wide) programs
based on Licensor's assessment of the long-term best
interests of hotels using the System, considering the
interest of the System overall;
(f) maintenance, appearance and condition of the Hotel;
(g) quality and types of services offered to customers at
the Hotel, and
(h) its 100% Satisfaction Guarantee rule of operation, and
any similar rules of operation designed to maintain or
improve relationships with past, present and potential
guests and other hotel customers, as such rule or rules
are in effect or as they may be established or revised
hereafter;
(8) use such automated guest service and/or hotel management
and/or telephone system(s) which Licensor deems to be in the best
interests of the System based on Licensor's assessment of
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the long-term best interests of hotels using the System, considering
the interests of the System overall, including any additions,
enhancements, supplements or variants thereof which may be developed
during the term hereof;
(9) participate in and use those reservation services which
Licensor deems to be in the best interests of the System based on
Licensor's assessment of the long-term best interests of hotels using
the System, considering the interests of the System overall, including
any additions, enhancements, supplements or variants thereof which may
be developed during the term hereof;
(10) adopt improvements or changes to the System as may be from
time to time designated by Licensor;
(11) strictly comply with all governmental requirements,
including the filing and maintenance of any required trade name or
fictitious name registrations, paying all taxes, and maintaining all
governmental licenses and permits necessary to operate the Hotel in
accordance with the System;
(12) permit inspection of the Hotel by Licensor's representatives
at any time and give them free lodging for such time as may be
reasonably necessary to complete their inspections;
(13) upon request by Licensor, provide to Licensor statistics on
Hotel operations in the form specified by Licensor and using
definitions specified by Licensor;
(14) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior approvals;
(15) ensure that no part of the Hotel or System is used to
further or promote another lodging facility or any business that
competes with any business Licensor or an affiliate engages in at any
time during the Agreement (including, but not limited to, the
timeshare resort or vacation ownership business), except for those
approved by Licensor, its parent, subsidiaries or affiliates;
(16) use every reasonable means to encourage use of Homewood
Suites facilities everywhere by the public; provided, however, this
will not prohibit Licensor from requiring Licensee's participation in
programs designed to refer prospective customers to other hotels (in
the System or otherwise);
(17) in all respects use Licensee's best efforts to reflect
credit upon and create favorable public response to the name "Homewood
Suites";
(18) comply with Licensor's requirements concerning
confidentiality of information;
(19) not at any time during the term of this Agreement, through
itself or any member of an affiliated group (as defined by the
Internal Revenue Code) own, in whole or in part, or be the licensor
of, a hotel brand, tradename, system or chain without the written
consent of Licensor in its sole discretion. Hereafter, any entity
that, through itself or any affiliate, owns in whole or in part, or is
the licensor of a hotel brand, tradename, system or chain shall be
referred to as a "Competitor"; and
(20) maintain possession and control of the Hotel and Hotel site.
B. UPGRADING OF THE HOTEL. Licensor may at any time during the License
Term require substantial modernization, rehabilitation and other
upgrading of the Hotel to meet the then current standards specified in
the Manual as long as those standards apply to a majority of the
hotels operated by Licensor and its licensees in the same brand or
category as the Hotel. Nothing in this paragraph shall be construed to
relieve Licensee from the obligation to maintain acceptable product
quality ratings at the Hotel and maintain the Hotel in accordance with
the Manual at all times during the Agreement. Limited exceptions from
those standards may be made by Licensor based on local conditions or
special circumstances. If the upgrading requirements contained in this
Paragraph 6b cause Licensee undue hardship, Licensee may terminate
this Agreement by paying a fee computed according to Paragraph 13f.
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C. STAFF AND MANAGEMENT. Licensee is at all times responsible for the
management of the Hotel's business. Licensee may fulfill this
responsibility by retaining a third party management company
("Manager"); provided, however, Licensee shall not enter into any
lease, management agreement or other similar arrangement for the
operation of the Hotel or any part thereof with any entity without the
prior written consent of Licensor in Licensor's sole discretion (there
being no obligation on the part of Licensor to approve a third party
management company). Licensee understands that Licensor will not
normally approve a Competitor to manage the Hotel, or any entity that
(through itself or an affiliate) is the exclusive manager for a
Competitor. If a Manager becomes a Competitor at any time during the
term of the Agreement, Licensee shall have 90 days to retain a
substitute manager suitable to Licensor. As a prerequisite for
Licensor's approval of a Manager, the proposed management agreement
must provide (1) that the Manager has authority for the day-to-day
management of the Hotel; (2) that the Manager has the authority to
perform the obligations of the Licensee under this Agreement; and (3)
that in the case of any conflict between this Agreement and the
management agreement, this Agreement prevails.
7. FEES.
A. Commencing on the opening date of the Hotel as a Homewood Suites hotel
and continuing for the full term of this Agreement, for each month (or
part of a month), Licensee will pay to Licensor by the 15th of the
following month:
(1) a royalty fee equal to 4 percent of the gross revenues
attributable to or payable for rental of Guest Suites at the Hotel with
deductions for sales and room taxes only ("Gross Suites Revenue"); and
(2) a "Marketing/Reservation Contribution" equal to 4 percent of Gross
Suites Revenue. The Marketing/Reservation Contribution is subject to change
by Licensor from time to time, which Marketing/Reservation Contributions do
not include the cost, installation or maintenance of reservation services
equipment or training; and
(3) all amounts due Licensor for any other miscellaneous fees or
invoices or for goods or services purchased by or provided to Licensee or
paid by Licensor on Licensee's behalf; and
(4) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor for the receipt of the payments required in (1), (2)
and (3) of this Paragraph above, unless the tax is an optional alternative
to an income tax otherwise payable by Licensor.
B. Licensee will operate the Hotel so as to maximize Gross Suites Revenue
consistent with sound marketing and industry practice and will not
engage in any conduct which is likely to reduce Gross Suites Revenue
in order to further other business activities.
C. Royalties may be charged on revenues (or upon any other basis, if so
determined by Licensor) from any activity conducted at the Hotel if
added by mutual agreement and if: (i) not now offered at hotels within
the System generally and is likely to benefit significantly from or be
identified significantly with the Homewood Suites name or other
aspects of the System or (ii) designed or developed by or for
Licensor.
D. Licensor may charge for optional products or services accepted by
Licensee from Licensor either in accordance with current practice or
as developed in the future.
E. A Guest Suite addition fee for guest suite additions to a hotel set
forth in Licensor's then current "Franchise Offering Circular" shall
be paid by Licensee to Licensor on Licensee's submission of an
application to add any Guest Suites to the Hotel. As a condition to
Licensor granting its approval of such application, Licensor may
require Licensee to upgrade the Hotel, subject to Paragraph 6b.
F. Local and regional marketing programs and related activities may be
conducted by Licensee, but only at Licensee's expense and subject to
Licensor's requirements. Reasonable charges may be made by
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Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
G. Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall reimburse
Licensor on or before the 15th of each month for call costs associated
with such programs including, but not limited to, travel agent
commissions and third party reservation service charges (such as
airline reservation systems).
H. Each payment paid by Licensor under this Paragraph 7 shall be
accompanied by the monthly statement referred to in Paragraph 8.
Licensor may apply any amounts received under this Paragraph 7 to any
amounts due under this Agreement. If any amounts are not paid when
due, such non-payment shall constitute a breach of this Agreement and,
in addition, such unpaid amounts will accrue a service charge
beginning on the first day of the month following the due date of 1
1/2 percent per month but not to exceed the maximum amount permitted
by applicable law.
8. RECORDS AND AUDITS.
A. DAILY AND MONTHLY REPORTS. At the request of Licensor, Licensee shall
prepare and deliver daily reports to Licensor, which reports will
contain information reasonably requested by Licensor on a daily basis,
such as daily rate and room occupancy, and which may be used by
Licensor for its reasonable purposes. At least monthly, Licensee shall
prepare a statement which will include all information concerning
Gross Suites Revenue, other revenues generated at the Hotel, suite
occupancy rates, reservation data and other information required by
Licensor (the "Data"). The Data will be permanently recorded and
retained as may be reasonably required by Licensor. By the 15th of
each month, Licensee will submit to Licensor a statement setting forth
the Data for the previous month and reflecting the computation of the
amounts then due under Paragraph 7. The statement will be in such form
and detail as Licensor may reasonably request from time to time, and
may be used by Licensor for its reasonable purposes.
B. MAINTENANCE OF RECORDS. Licensee shall, in a manner and form
satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current
basis (and preserve for no less than four years), complete and
accurate records concerning Gross Suites Revenue and all financial,
operating, marketing and other aspects of the Hotel, and maintain an
accounting system which fully and accurately reflects all financial
aspects of the Hotel and its business. Such records shall include
books of account, tax returns, governmental reports, register tapes,
daily reports, and complete quarterly and annual financial statements
(profit and loss statements, balance sheets and cash flow statements).
C. AUDIT. Licensor may require Licensee to have the Gross Suites Revenue
or other monies due hereunder computed and certified as accurate by a
certified public accountant. During the License Term and for two years
thereafter, Licensor and its authorized agents shall have the right to
verify information required under this Agreement by requesting,
receiving, inspecting and auditing, at all reasonable times, any and
all records referred to above wherever they may be located (or
elsewhere if reasonably requested by Licensor). If any such inspection
or audit discloses a deficiency in any payments due hereunder,
Licensee shall immediately pay to Licensor (i) the deficiency, (ii) a
service charge thereon as provided in Paragraph 7h, and (iii) all
inspection and audit costs (including travel, lodging, meals, salaries
and other expenses of the inspecting or auditing personnel).
Licensor's acceptance of Licensee's payment of any deficiency as
provided for herein shall not waive Licensor's right to terminate this
Agreement as provided for herein in Paragraph 13. If the audit
discloses an overpayment, Licensor shall refund the overpayment to
Licensee within 30 days.
D. ANNUAL FINANCIAL STATEMENTS. Licensee will submit to Licensor complete
year-end financial statements for the Hotel, Licensee and/or any
guarantors as soon as available but not later than 90 days after the
end of Licensee's fiscal year. Licensee will certify them to be true
and correct and to have been prepared in accordance with generally
accepted accounting principles consistently applied, and any false
certification will be a breach of this Agreement.
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E. All of the information provided to Licensor pursuant to this paragraph
or any other part of this Agreement, or pursuant to any agreement
ancillary to this Agreement (including agreements relating to the
System 21 business system or other property management system provided
by Licensor) (the "Information"), shall be the property of Licensor.
HOWEVER, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
INFORMATION, SUCH AS FINANCIAL STATEMENTS, PREPARED FOR THE HOTEL,
LICENSEE AND/OR GUARANTORS, WHICH ANY SUCH PARTIES ARE REQUIRED BY LAW
OR BY THEIR NORMAL BUSINESS PRACTICES TO USE FOR OTHER PURPOSES (SUCH
AS IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION OR OTHER
GOVERNMENTAL AUTHORITIES OR FOR TRANSMISSION TO SHAREHOLDERS) MAY BE
USED BY THEM FOR SUCH PURPOSES, AND SUCH PARTIES SHALL RETAIN
OWNERSHIP IN SUCH INFORMATION TO THE EXTENT NECESSARY TO PERMIT SUCH
USE. NEVERTHELESS, LICENSOR SHALL OWN THE COPIES OF ANY SUCH
INFORMATION PROVIDED BY ANY SUCH PARTIES IN ACCORDANCE WITH THE TERMS
OF THIS AGREEMENT. Licensor will use reasonable efforts to sort,
categorize, classify and otherwise analyze the information to help
licensees market their hotels. The Information will remain the
proprietary information of Licensor which Licensor will share with
licensees only as determined by Licensor in its sole discretion.
Licensor and its affiliates may use the Information for any reason
whatsoever, including an earnings claim in Licensor's offering
circular.
9. INDEMNITY.
SUBJECT TO THE PROVISIONS OF ANY MANAGEMENT AGREEMENT BETWEEN LICENSOR (AS
MANAGER THEREUNDER) AND LICENSEE (AS OWNER THEREUNDER), Licensee will
indemnify, during and after the term of this Agreement, Licensor and its
affiliates, and their respective officers, directors, employees, agents,
predecessors, successors and assigns ("Indemnified Parties") against, hold
them harmless from, and promptly reimburse them for, all payments of money
(fines, damages, legal fees, expenses, etc.) by reason of any claim,
demand, tax, penalty, or judicial or administrative investigation or
proceeding (even where negligence of Licensor and/or its Entities and/or
their Indemnified Parties is actual or alleged) arising from any claimed
occurrence at the Hotel or arising from, as a result of, or in connection
with the development or operation of the Hotel (including, but not limited
to, the design, construction, financing, furnishing, equipment, acquisition
of supplies or operation of the Hotel in any way), or any other of
Licensee's acts, omissions or obligations or those of anyone associated or
affiliated with Licensee or the Hotel in any way arising out of or related
to this Agreement. At the election of Licensor, Licensee will also defend
Licensor and/or its Entities and/or their Indemnified Parties against the
same. In any event, Licensor will have the right, through counsel of its
choice, to control any matter to the extent it could directly or indirectly
affect Licensor and/or its Entities and/or their Indemnified Parties
financially. Licensee will also reimburse Licensor for all expenses,
including attorneys' fees and court costs, reasonably incurred by Licensor
to protect itself and/or its Entities and/or their Indemnified Parties
from, or to remedy Licensee's defaults or to collect any amounts due under
this Agreement.
10. INSURANCE.
A. Licensee will comply with Licensor's specifications for insurance as
to amount and type of coverage as may be reasonably specified by
Licensor from time to time in writing and will in any event maintain
as a minimum the following insurance underwritten by an insurer
approved by Licensor:
(1) employer's liability and workers' compensation insurance as
prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming Licensor and its
then current Entities and their predecessors, successors and assigns as
additional insureds with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence; and
(3) commercial general liability insurance (with products, completed
operations and independent contractors coverage) and comprehensive
automobile liability insurance, all on an occurrence and per location basis
naming Licensor, its Entities and their predecessors, successors and
assigns as additional insureds and underwritten by an insurer approved by
Licensor, with single-limit coverage for personal and bodily injury and
property damage of at least $10,000,000 for each occurrence; and
(4) in connection with all construction at the Hotel during the
License Term, Licensee will cause the general contractor to maintain with
an insurer approved by Licensor commercial general liability
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insurance (with products, completed operations, and independent contractors
coverage including workers' compensation and automobile liability insurance
for such independent contractors) in at least the amount of $10,000,000 for
each occurrence for personal and bodily injury and property damage with
Licensor, its Entities and their predecessors, successors and assigns as
additional insureds.
B. EVIDENCE OF INSURANCE/CHANGES. This coverage shall be evidenced by
original certificates of insurance submitted to Licensor
simultaneously herewith, annually hereafter and each time a change is
made in any insurance or insurance carrier, Licensee will furnish to
Licensor certificates of insurance including the term and coverage of
the insurance in force, the persons insured, and a statement that the
coverage may not be cancelled, altered or permitted to lapse or expire
without 30 days advance written notice to Licensor. Licensor will send
Licensee notice of any policy or coverage which Licensor, in its sole
discretion, finds unacceptable and upon receipt of such notice,
Licensee will promptly undertake to change such policy or coverage.
C. If Licensee fails or neglects to obtain or maintain the insurance or
policy limits required by this Agreement, Licensor shall have the
option, without notice, to obtain and maintain such insurance for
Licensee, and Licensee shall pay immediately upon demand therefore,
the premiums and the cost incurred by Licensor in taking such action.
11. TRANSFER.
A. TRANSFER OF THIS AGREEMENT BY LICENSOR. Licensor shall have the right
to transfer or assign this Agreement or any of Licensor's rights,
obligations, or assets under this Agreement to any person or legal
entity provided that the transferee assumes all of Licensor's
obligations to Licensee under this Agreement.
B. TRANSFERS BY LICENSEE.
(1) General Statement of Explanation and Intent. This Agreement is not
transferable by Licensee, and a change in ownership of the Hotel or the
licensed business (i.e., either this Agreement, the Licensee or any
indirect ownership interest in the Licensee) is not allowed under this
Agreement. Certain intra-family transfers of interest and (in the case of
corporate licensees) corporate restructurings are permitted as long as the
requirements described below are met. However, Licensor has entered into
this Agreement with a particular Licensee or its owners. If the Licensee
wants to transfer the Hotel or its interest in the licensed business, such
a transfer will constitute a "change of ownership". If the transferee wants
to continue to operate the Hotel as a Homewood Suites hotel, the transferee
will have to apply for a new license which, if approved, will last at most
for the balance of the term of this Agreement. If the change of ownership
is not approved, or if the transferee does not want to continue to operate
the Hotel as a Homewood Suites hotel, Licensor may refuse to consent to the
termination of this Agreement. If Licensor does consent to termination,
this Agreement will terminate and Licensee will owe liquidated damages. In
addition, if the transfer is to a Competitor, Licensor has the right to buy
the Hotel. The foregoing explanation is more fully described and qualified
by the following specific provisions.
(2) Licensee understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Licensee, and that Licensor has
entered into this Agreement in reliance on the business skill, financial
capacity, and personal character of Licensee (if Licensee is an
individual), and that of the partners, members, or stockholders of Licensee
(if Licensee is a partnership, company, corporation, or other legal
entity). Accordingly, no direct or indirect interest in the Hotel or in
this Agreement, and no direct or indirect Equity Interest (as defined
herein) in Licensee may be sold, leased, assigned, or transferred, (such
instances hereafter referred to collectively as a "Transfer"), without the
consent of the Licensor. Nothing herein shall require Licensor's approval
for any pledge, mortgage, or hypothecation of all or any part of the assets
of the licensed business (other than this Agreement or any Equity Interest
in Licensee) to banks or other lending institutions.
(3) Any purported Transfer, by operation of law or otherwise, not in
accordance with the provisions of this Agreement shall be null and void and
shall constitute a breach of this Agreement, for which Licensor may
terminate this Agreement upon notice without opportunity to cure pursuant
to Paragraph 13d, and as a result of which Licensee will owe liquidated
damages.
9
(4) References in this Agreement to "Equity Interests" shall mean any
direct or indirect beneficial interest in Licensee (an "indirect" interest
is an interest in an entity other than the Licensee that either itself, or
through others, has an interest in the Licensee). In addition,
"publicly-traded equity interest" shall mean any Equity Interest which is
traded on any securities exchange or is quoted in any publication or
electronic reporting service maintained by the National Association of
Securities Dealers, Inc. or any of its successors. In computing changes of
Equity Interests, limited partners will not be distinguished from general
partners. Licensor's judgment will be final if there is any question as to
the definition of Equity Interest or as to the computation of relative
Equity Interests, the principal considerations being: direct and indirect
(i) power to exercise control over the affairs of Licensee; (ii) right to
share in Licensee's profits; and (iii) exposure to risk in the Licensee's
business.
(5) Licensee represents that the Equity Interests are directly and (if
applicable) indirectly owned as shown on the Rider.
C. PROCEDURES FOR TRANSFERS. Licensee must provide written notice to
Licensor in advance of any proposed Transfer stating the identity of
the prospective transferee, purchaser, or lessee and the terms and
conditions of the conveyance. As a condition to consenting to the
transfer, Licensor may require any one or more of the following to be
met:
(1) Licensee will upon request provide a copy of any proposed
agreement of transfer and all other information with respect thereto which
Licensor may reasonably require;
(2) Licensee will upon request provide documents showing ownership
structure of the Licensee, site control by the Licensee, possession or
management control by the Licensee, financial statements of any
participants, and any other documents reasonably requested by Licensor;
(3) Licensee will upon request pay a processing fee to Licensor of up
to $5,000 to cover Licensor's costs to review and consent to the Transfer;
provided however, in the case of a transfer of Equity Interests which
require registration under any federal or state securities law, Licensee
will pay a processing fee that will not exceed $25,000;
(4) Licensee and all participants in any proposed public offering
(including the sale of partnership or membership interests) (i) agree to
fully indemnify Licensor in connection with the registration, (ii) furnish
Licensor with all information requested, and (iii) avoid using Licensor's
service marks or trademarks or otherwise implying Licensor's participation
in or endorsing of any public offering;
(5) Licensee will at all times adequately provide for the management
of the Hotel during any Transfer; or
(6) Licensor may require the transferee to promptly execute a new
license agreement on Licensor's then current license agreement for the
unexpired term of this Agreement, and Licensor may require the guarantee of
the new license agreement by the same guarantors of this Agreement (or
substitute guarantors approved by Licensor in its sole discretion).
D. PERMITTED TRANSFERS. Licensor will not unreasonably withhold consent
to any of the following Transfers provided Licensee complies with all
the requirements specified by Licensor pursuant to Subparagraph c
above (it being understood that if Licensee is in default of any of
its obligations under the Agreement, it will not be unreasonable for
Licensor to refuse to consent to any of these Transfers):
(1) Equity Interests which are not publicly-traded may be transferred,
if after the transaction, Glade M. Knight owns, directly or indirectly, not
less than 50% of all Equity Interests and controls the management and
policies of Licensee and, in the case of any such permitted transfer, the
requirements of clauses (3) and (6) of subparagraph c. above need not be
complied with by Licensee.
(2) Publicly-traded equity interests may be transferred (without
Licensor's consent and without notification) if such transfer is exempt
from registration under federal securities law and if immediately
10
before and after the transfer, the transferor and transferee respectively
each own less than 25 percent of the Equity Interests in Licensee.
(3) Licensee, if a natural person, may transfer its interest in the
License or Equity Interest in the Licensee to one or more of Licensee's
spouse, parents, siblings, nephews, descendants or spouses' descendants or
to a corporation entirely owned by Licensee ("Permitted Transferees").
(4) If Licensee is a natural person, upon the Licensee's death, the
License or Licensee's Equity Interest in the Licensee will pass in
accordance with Licensee's will, or, if Licensee dies intestate, in
accordance with laws of intestacy governing the distribution of the
Licensee's estate, as the case may be, provided the transferee is one or
more of the decedent's Permitted Transferees (excluding corporations
formerly owned by the Licensee) and within one year after the death the
Permitted Transferees meet all Licensor's normal requirements of an
approved applicant.
(5) Licensee may sell or lease the Hotel, the Hotel site, or any
portion thereof if, in the reasonable judgment of Licensor, after such
transfer, Licensee will retain possession and control of the Hotel site and
management control of the Hotel operations (which may be via third party
management contract pursuant to Paragraph 6c). If, in the reasonable
judgment of Licensor, the transfer of the Hotel will result in the loss of
possession or control of the Hotel or Hotel site or management of the
Hotel, the transfer will constitute a change of ownership as described in
Subparagraph e.
E. CHANGE OF OWNERSHIP.
(1) Any Transfer that does not qualify as a permitted transfer under
Subparagraph d above shall constitute a change of ownership. If in the case
of a change of ownership, the transferee desires to continue to operate the
Hotel as a Homewood Suites hotel, the transferee must submit an application
for a new license agreement. The new license, if approved, will be at most
for the unexpired term of this Agreement. The transferee shall be
responsible for all normal fees and costs (including application fees and
costs of improvements to the Hotel).
(2) Licensor shall process such change of ownership application in
good faith and in accordance with Licensor's then current procedures,
criteria and requirements regarding upgrading of the Hotel, credit,
operational abilities and capabilities, prior business dealings, market
feasibility, guarantees, and other factors deemed relevant by Licensor. If
such change of ownership application is approved, Licensor and the new
owner shall, upon surrender of this Agreement, enter into a new license
agreement. The new license agreement shall be on Licensor's then current
form and contain Licensor's then current terms (except for duration), and
if applicable, the new license agreement will contain specified upgrading
and other requirements. If the application is approved, Licensee submits a
voluntary termination of this Agreement and signs a release (in a form
satisfactory to Licensor) of all claims against Licensor, and the proposed
new owner executes a new license within 30 days of the sale of the Hotel,
no liquidated damages described in Paragraph 13 will be owed by Licensee
for the termination of this Agreement.
(3) If a change of ownership application for the proposed transferee
is not approved by Licensor or the transferee does not want to continue to
operate the Hotel as a Homewood Suites hotel, Licensor may refuse consent
to the transfer and reserve all remedies; if Licensee does consent and the
Transfer occurs, then this Agreement shall terminate pursuant to Paragraph
13d hereof and Licensor shall be entitled to all of its remedies including
liquidated damages.
F. TRANSFER TO COMPETITOR. Notwithstanding any of the foregoing, if the
Licensee receives a bona fide offer from a Competitor to purchase or
lease the Hotel or to purchase Licensee or any entity that controls
Licensee, or to purchase an interest in either, and Licensee or any
person or entity that owns or controls Licensee wishes to accept such
offer, Licensee shall give written notice thereof to Licensor, stating
the name and full identity of the prospective purchaser or tenant, as
the case may be, including the names and addresses of the owners of
the capital stock, partnership interests or other proprietary
interests of such prospective purchaser or tenant, the price or rental
and all terms and conditions of such proposed transaction, together
with all other information with respect thereto which is requested by
Licensor and reasonably available to Licensee. Within 60 days after
receipt by Licensor of such
11
written notice from Licensee, Licensor shall elect by written notice to
Licensee one of the following four alternatives:
(1) If the proposed transaction is a sale or lease of the Hotel,
Licensor (or its designee) shall have the right to purchase or lease the
Hotel premises and related property at the same price or rental and upon
the same terms and conditions as those set forth in such bona fide offer
from a Competitor. In such event Licensee and Licensor (or its designee)
shall promptly enter into an agreement for sale or lease at the price or
rental and on terms consistent with such bona fide offer.
(2) If the proposed transaction is a purchase of all or a portion of
the stock or assets (which includes the Hotel) of Licensee or the person
that owns or controls Licensee, Licensor (or its designee) shall have the
right to purchase the Hotel premises and related property. If the parties
are unable to agree as to a purchase price and terms within thirty days of
Licensor's election, the fair market value of the Hotel premises and
related property shall be determined by arbitration as follows: Either
party may by written notice to the other appoint an arbitrator. Thereupon,
within 15 days after the giving of such notice, the other shall by written
notice to the former appoint another arbitrator, and in default of such
second appointment the arbitrator first appointed shall be the sole
arbitrator. When any two arbitrators have been appointed as aforesaid, they
shall, if possible, agree upon a third arbitrator and shall appoint him by
notice in writing, signed by both of them in triplicate, one of which
triplicate notices shall be given to each party hereto; but if 15 days
shall lapse without the appointment of the third arbitrator as aforesaid,
then such third arbitrator shall be appointed by the American Arbitration
Association from its qualified panel of arbitrators, and shall be a person
having at least ten (10) years' recent professional experience as to the
subject matter in question. Upon appointment of the third arbitrator
(whichever way appointed as aforesaid), the three arbitrators shall meet
and render their decision. The decision of a majority of the arbitrators so
chosen shall be conclusive. Licensor (or its designee) shall have the
right, at any time within 30 days of being notified in writing of the
decision of the arbitrators as aforesaid, to purchase the Hotel premises
and related property at the valuation fixed by the arbitrators. The parties
shall share equally the expense of such arbitration.
(3) To terminate this Agreement, in which event Licensee shall be
obligated to pay to Licensor liquidated damages pursuant to a Special
Termination as set forth in Paragraph 13f.
(4) To refuse to consent to the Transfer, reserving all remedies under
the applicable law.
G. FINANCING. The construction and/or operation of the Hotel may not be
financed by a public offering of any right, title or interest in the
Hotel, the property upon which it is built or the receipts from its
operation without the prior review and approval of the applicable
documentation by Licensor. Licensee shall submit a non-refundable
$25,000 fee with said documentation.
12. CONDEMNATION AND CASUALTY.
A. CONDEMNATION. Licensee shall, at the earliest possible time, give
Licensor notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken,
Licensor may, in its sole discretion and within a reasonable time of
the taking (within four months) transfer this Agreement to a nearby
location selected by Licensee. If Licensor approves the new location
and authorizes the transfer and if within one year of the closing of
the Hotel Licensee opens a new hotel at the new location in accordance
with Licensor's specifications, then the new hotel will be deemed to
be the Hotel licensed under this Agreement. If a condemnation takes
place and a new hotel does not, for whatever reason, become the Hotel
under this Agreement in strict accordance with this paragraph (or if
it is reasonably evident to Licensor that such will be the case), this
Agreement will terminate immediately upon notice thereof by Licensor
to Licensee, without the payment of liquidated damages as calculated
in Paragraph 13f.
B. CASUALTY. If the Hotel is damaged by fire or other casualty, Licensee
will expeditiously repair the damage. If the damage or repair requires
closing the Hotel, Licensee will immediately notify Licensor, will
repair or rebuild the Hotel according to Licensor's standards, will
commence reconstruction within four months after closing, and will
reopen the Hotel for continuous business operations as soon as
practicable (but in any event within one year after the closing of the
Hotel), giving Licensor ample advance notice of the date of reopening.
If the Hotel is not reopened according to this Paragraph, this
12
Agreement will terminate immediately, upon notice thereof by Licensor
to Licensee, with the payment of liquidated damages as calculated in
Paragraph 13f, provided however, if Licensee's insurer fails to pay
the applicable insurance policy proceeds to Licensee, or if Licensee's
lender, pursuant to a valid agreement with Licensee, refuses to allow
the insurance proceeds to be used for repair or rebuilding, the
Agreement may be terminated by Licensee without payment of the
liquidated damages in Paragraph 13f. In such case Licensee shall
notify Licensor and provide any reasonable proof requested by
Licensor.
C. NO EXTENSIONS OF TERM. Nothing in this Paragraph 12 will extend the
License Term but Licensee shall not be required to make any payments
pursuant to Paragraph 7 for periods during which the Hotel is closed
by reason of condemnation or casualty.
13. TERMINATION.
A. EXPIRATION OF TERM. Unless terminated earlier, this Agreement will
expire without notice October 4, 2019.
B. PERMITTED TERMINATION PRIOR TO EXPIRATION OF TERM. Licensee may
terminate this Agreement on the tenth or fifteenth anniversary date of
the opening of the Hotel by giving at least 12 but not more than 15
months advance notice to Licensor accompanied by the payment as
provided in Paragraph 13f herein.
C. TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE. This
Agreement may be terminated if Licensee fails to satisfy any
obligations under this Agreement or any attachment hereto. Except in
the case of an immediate termination as provided in subparagraph 13d
below, this Agreement shall terminate if Licensee fails to cure an
Event of Default after the Licensor furnishes adequate notice of
termination based on the Event of Default.
(1) An "Event of Default" shall occur if the Licensee fails to satisfy
or comply with any of the requirements, conditions, or terms set forth in
(i) this Agreement or any attachment including, but not limited to, any
provisions regarding: any transfer of the Hotel, or any direct or indirect
interest in the Agreement or Licensee, any representation or warranty, any
fee obligation, any operational requirements (including the standards in
the Manual); trademarks usage; maintenance of records, insurance and
indemnity; or (ii) any other agreement between Licensor (or an affiliate)
and Licensee relating to the Hotel, including, but not limited to, any
property management system agreement, such as the System 21 business system
agreement, or any agreement to manage the Hotel.
(2) Notice of termination shall be adequate, if mailed thirty (30)
days (or such longer period required by applicable law) in advance of the
termination date.
(3) Licensor's notice of termination shall not relieve Licensee of its
obligations under this Agreement or any attachment.
(4) As a result of Licensee's efforts to comply with the terms and
conditions contained on Attachment A and elsewhere in this Agreement,
Licensee will incur substantial expense and expend substantial time and
effort. Licensee acknowledges and agrees that Licensor shall have no
liability or obligation to Licensee for any losses, obligations,
liabilities or expenses incurred by Licensee if (i) Licensee commits an
Event of Default as described in Paragraph 13c(1); (ii) the Hotel is not
authorized by Licensor to Open as defined in Attachment A or (iii) this
Agreement is terminated because Licensee has not complied with the terms
and conditions of this Agreement.
(5) Notwithstanding the foregoing, following an Event of Default,
Licensor may at any time, in its sole discretion, suspend its obligations
under this Agreement (including reservation services).
D. IMMEDIATE TERMINATION BY LICENSOR. Notwithstanding the foregoing
paragraph, this Agreement may be immediately terminated (or terminated
at the earliest time permitted by applicable law) if one or more of
the following material breaches to this Agreement or any Attachment
occur:
13
(1) Any Event of Default where a prior Event of Default had also
occurred during the preceding 12 months, but the License was not terminated
because Licensee cured the prior Event of Default;
(2) Licensee or any guarantor of Licensee's obligations hereunder
shall:
(a) generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or
(b) commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its property; or
(c) take any corporate or other action to authorize any of the
actions set forth above in Paragraphs (a) or (b).
(3) Any case, proceeding or other action against Licensee or any such
guarantor shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its property, and
such case, proceeding or other action (i) results in the entry of an order
for relief against it which is not fully stayed within seven business days
after the entry thereof or (ii) remains undismissed for a period of 45
days; or
(4) an attachment remains on all or a substantial part of the Hotel or
of Licensee's or any such guarantors assets for 30 days; or
(5) Licensee or any such guarantor fails within 60 days of the entry
of a final judgment against Licensee in any amount exceeding $50,000 to
discharge, vacate or reverse the judgment, or to stay execution of it, or
if appealed, to discharge the judgment within 30 days after a final adverse
decision in the appeal; or
(6) Licensee loses possession or the right to possession of all or a
significant part of the Hotel or Hotel site; or
(7) Licensee fails to continue to identify the Hotel to the public as
a Homewood Suites hotel; or
(8) Licensee contests in any court or proceeding Licensor's ownership
of the System or any part of the System, or the validity of any service
marks or trademarks associated with Licensor's business; or
(9) Any action is taken toward dissolving or liquidating Licensee or
any such guarantor, if it is a corporation or partnership, except for death
of a partner; or
(10) Licensee or any of its principals is, or is discovered to have
been convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System, the Licensor and/or
its Entities in any way; or
(11) Licensee maintains false books and records of accounts or submits
false reports or information to Licensor.
(12) Licensee becomes a Competitor (as defined in Paragraph 6a(19).
14
E. DE-IDENTIFICATION OF HOTEL UPON TERMINATION. Upon termination or
expiration of the term, Licensee will take whatever action is
necessary to assure that no use is made of any part of the System
(including but not limited to the Marks) at or in connection with the
Hotel or otherwise. Licensee shall return to Licensor the Manual and
all other proprietary materials, remove all distinctive System
features of the Hotel, including the primary freestanding sign down to
the structural steel, and take all other actions ("De-identification
Actions") required to preclude any possibility of confusion on the
part of the public that the Hotel is still using all or any part of
the System or is otherwise holding itself out to the public as a
Homewood Suites hotel. If within 30 days after termination of this
Agreement Licensee fails to comply with this paragraph, Licensor or
its agents at Licensee's expense, may enter the premises of the Hotel
to perform the De-identification Actions. The preceding sentence shall
not in any way limit Licensor's other rights or remedies under this
Agreement.
F. LIQUIDATED DAMAGES. The parties recognize the difficulty of
ascertaining damages to Licensor resulting from premature termination
of this Agreement, and have provided for liquidated damages, which
represent the parties' best estimate as to the damages arising from
the circumstances in which they are provided and which are only
damages for the premature termination of this Agreement, and not as a
penalty or as damages for breaching this Agreement or in lieu of any
other payment. If this Agreement is terminated other than by the
expiration of the term described in Paragraph 13a, Licensee will pay
Licensor, within 10 days of termination, liquidated damages in an
amount determined as follows:
(1) an amount equal to the amount payable under Paragraph 7 (regarding
Fees) for the three years prior to termination; or
(2) if the Hotel opened but has been Open for less than three years,
an amount equal to the greater of: (i) 36 times the monthly average payable
under Paragraph 7, or (ii) 36 times the amount payable under Paragraph 7
for the last full month prior to termination; or
(3) if the Hotel opened, but has not been in operation for one full
month, an amount equal to $3,000 per Guest Suite in the Hotel; or
(4) if the Agreement is terminated before the commencement of
construction or of the Work (as described in the applicable attachment), an
amount equal to the initial application fee that would be due for a license
application according to Licensor's then current franchise offering
circular (in addition to any initial application fee already paid); or
(5) if the Agreement is terminated after commencement of construction
or of the Work but before opening of the Hotel, an amount equal to two
times the initial application fee; or
(6) if the Agreement is terminated pursuant to Paragraph 13b
(permitted termination after 10th or 15th year) only, an amount equal to
the amount payable under Paragraph 7 for the two years prior to notice of
termination.
Furthermore, Licensee recognizes the additional harm by way of
confusion with respect to national accounts, greater difficulty in
re-entering the market, and damage to goodwill of the Marks that
Licensor will suffer in the case of (i) a Licensee who terminates two
or more license agreements with Licensor at approximately the same
time (between either itself or its affiliates and Licensor) or (ii) a
license that terminates as a result of the Hotel or Licensee being
acquired by a Competitor, and the Licensor is unable or elects not to
buy the Hotel pursuant to Paragraph 11f (each of these will be
referred to as a "Special Termination"). Licensee agrees that in the
case of a Special Termination, the amount of liquidated damages as
calculated above will be doubled.
14. RENEWAL.
This Agreement is non-renewable.
15. RELATIONSHIP OF PARTIES.
15
A. NO AGENCY RELATIONSHIP. Licensee is an independent contractor. Neither
party is the legal representative or agent of, or has the power to
obligate (or has the right to direct or supervise the daily affairs
of) the other for any purpose whatsoever. Licensor and Licensee
expressly acknowledge that the relationship intended by them is a
business relationship based entirely on, and defined by, the express
provisions of this Agreement and that no partnership, joint venture,
agency, fiduciary or employment relationship is intended or created by
reason of this Agreement.
B. LICENSEE'S NOTICES TO PUBLIC CONCERNING INDEPENDENT STATUS. Licensee
will take all necessary steps including those reasonably requested by
Licensor to minimize the chance of a claim being made against Licensor
for anything that occurs at the Hotel, or for acts, omissions or
obligations of Licensee or anyone associated or affiliated with
Licensee or the Hotel. Such steps may, for example, include giving
notice in Guest Suites, public rooms and advertisements, on business
forms and stationery, etc., making clear to the public that Licensor
is not the owner or operator of the Hotel and is not accountable for
what happens at the Hotel. Unless required by law, Licensee will not
use the words "Homewood", "Homewood Suites" or any other names or mark
associated with the System to incur any obligation or indebtedness on
behalf of Licensor. Licensee shall not enter into or execute any
contracts in the name "Homewood Suites hotel", and all contracts for
the Hotel's operations and services at the Hotel shall be in the name
of Licensee or Licensee's management company. Likewise, the words
"Homewood", "Homewood Suites", or any similar words will not be used
to name or identify developments adjacent to or associated with the
Hotel, nor will Licensee use such names in its general business in any
manner separated from the business of the Hotel.
16. MISCELLANEOUS.
A. SEVERABILITY AND INTERPRETATION. The remedies provided in this
Agreement are not exclusive. If any provision of this Agreement is
held to be unenforceable, void or voidable as being contrary to the
law or public policy of the jurisdiction entitled to exercise
authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of such provision(s)
impairs the consideration for this Agreement in a manner which
frustrates the purpose of the parties or makes performance
commercially impracticable. The provisions of this Agreement shall be
interpreted based on the reasonable intention of the parties in the
context of this transaction without interpreting any provision in
favor of or against any party whether or not such party was the
drafting party or by such party's position relative to the other
party. Any covenant, term or provision of this Agreement which, in
order to effect the intent of the parties, must survive the
termination of this Agreement, shall survive any such termination.
B. CONTROLLING LAW. This Agreement shall become valid when signed by the
parties hereto. It shall be deemed made and entered into in the State
of Tennessee and shall be governed and construed under and in
accordance with the laws of the State of Tennessee. In entering into
this Agreement, Licensee acknowledges that it has sought, voluntarily
accepted and become associated with Licensor who is headquartered in
Memphis, Tennessee, and that this Agreement contemplates and will
result in business relationships with Licensor's headquarter's
personnel. The choice of law designation permits, but does not require
that all suits concerning this Agreement be filed in the State of
Tennessee.
C. EXCLUSIVE BENEFIT. This Agreement is exclusively for the benefit of
the parties hereto, and it may not give rise to liability to a third
party, except as otherwise specifically set forth herein. No agreement
between Licensor and anyone else is for the benefit of Licensee.
D. ENTIRE AGREEMENT. Licensor and the Licensee each acknowledge and
warrant to each other that they wish to have all terms of this
business relationship defined in this written agreement. Neither
Licensor nor Licensee wishes to enter into a business relationship
with the other in which any terms or obligations are the subject of
alleged oral statements or in which oral statements serve as the basis
for creating rights or obligations different than or supplementary to
the rights and obligations set forth in this Agreement. Accordingly,
Licensor and Licensee agree that this Agreement and any Attachments
hereto and the documents referred to herein, shall be construed
together and shall supersede and cancel any prior and/or
contemporaneous discussions or writings (whether described as
representations, inducements, promises, agreements or any other term)
between Licensor or anyone
16
acting on its behalf and Licensee or anyone acting on his, her or its
behalf, which might be taken to constitute agreements,
representations, inducements, promises or understandings (or any
equivalent to such terms) with respect to this Agreement or the
relationship between the parties and Licensor and Licensee each agree
that they have placed, and will place, no reliance on any such
discussions or writings. This Agreement (including any Attachments and
the documents referred to herein), is the entire agreement between the
parties and contains all of the terms, conditions, rights and
obligations of the parties with respect to the Hotel or any other
aspect of the relationship between the parties. No future license or
offer of a license for additional locations or any other business
activity have been promised to Licensee and no such license or offer
shall come into existence, except by means of a separate writing,
executed by Licensor's officer or such other entity granting the
license and specifically identified as a License Agreement. No change,
modification, amendment or waiver of any of the provisions of this
Agreement will be effective and binding upon Licensor unless it is in
writing, specifically identified as an amendment to this Agreement and
signed by Licensor's officer.
E. LICENSOR'S WITHHOLDING CONSENT. Licensor may withhold its consent,
wherever required under this Agreement, if any default or breach by
Licensee exists under this Agreement. Approvals and consents by
Licensor will not be effective unless evidenced by a writing duly
executed on behalf of Licensor.
F. NOTICES. Any notice must be in writing and will be effective on either
(1) the day it is sent via facsimile with a confirmation of receipt;
or (2) the third day after it is mailed by first class mail; or (3)
the day it is delivered by express delivery service; or (4) the third
day after it is sent by certified mail to the appropriate party at its
address first stated above or to such person and at such address as
may be designated by notice hereunder.
G. GENERAL RELEASE. Licensee and its respective heirs, administrators,
executors, agents, representatives and their respective successors and
assigns, hereby release, remise, acquit and forever discharge Licensor
and its Entities and their officers, directors, employees, agents,
representatives and their respective successors and assigns from any
and all actions, claims, causes of action, suits, rights, debts,
liabilities, accounts, agreements, covenants, contracts, promises,
warrants, judgments, executions, demands, damages, costs and expenses,
whether known or unknown at this time, of any kind or nature, absolute
or contingent, if any, at law or in equity, on account of any matter,
cause or thing whatsoever which has happened, developed or occurred at
any time from the beginning of time to and including the date of
Licensee's execution and delivery to Licensor of this Agreement and
that they will not institute any suit or action at law or otherwise
against Licensor directly or indirectly relating to any claim released
hereby by Licensee. This release and covenant not to sue shall survive
the termination of this Agreement. Licensee shall take whatever steps
are necessary or appropriate to carry out the terms of this release
upon Licensor's request.
H. DESCRIPTIVE HEADINGS. The descriptive headings in this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision in this Agreement.
I. WARRANTIES. Licensee warrants, represents and agrees that all
statements made by Licensee in the Application submitted to Licensor
in anticipation of this Agreement and all other documents and
information submitted by Licensee are true, correct and complete as of
the date hereof and will continue to be updated so that they are true,
correct and complete. This warranty and representation shall survive
the termination of this Agreement.
J. TIME. Time is of the essence in this Agreement.
K. INCLUDING. Including shall mean including, without limitation.
L. COUNTERPARTS. This Agreement may be executed in counterparts, and each
copy so executed and delivered shall be deemed an original.
M. AMENDMENTS. If an amendment to this Agreement is required prior to its
execution, said amendment shall be made a part of this Agreement as an
Attachment. If an amendment to this Agreement is
17
necessary after its execution, said amendment shall be made a part of
this Agreement in the form of a separate document.
N. PERFORMANCE REQUIREMENTS/RESPONSIBILITIES. Attachment A is hereby
incorporated by reference and made a part of this Agreement to set
forth certain of Licensee's performance conditions and requirements.
O. BUSINESS JUDGMENT. The parties hereto recognize, and any mediator or
judge is affirmatively advised, that certain provisions of this
Agreement describe the right of Licensor to take (or refrain from
taking) certain actions in the exercise of its assessment of the
long-term best interests of hotels using the System, considering the
interests of the System overall. Where such decisions have been taken
by Licensor and are supported by the business judgment of Licensor,
neither a mediator nor a judge nor any other person reviewing such
decisions shall substitute his, her or its judgment for the judgment
so exercised by Licensor.
17. EXPIRATION OF OFFER.
This Agreement constitutes an offer which must be accepted by the Licensee
named on the signature page hereof by dating, executing and returning to
Licensor two copies hereof (and all attachments hereto, including, if
required, the Guaranty) on or before the date specified on the Rider.
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
APPLE SUITES MANAGEMENT, INC. PROMUS HOTELS, INC.
By: /s/ Glade M. Knight By: /s/ Thomas P. Powell
------------------------------- --------------------------------
Name: Glade M. Knight Name: Thomas P. Powell
------------------------------- --------------------------------
Title: President Title: Sr. Vice President-Development
------------------------------ -------------------------------
Witness: /s/ C. Douglas Schepker Witness:/s/ Debbie Jackson
----------------------------- ------------------------------
Date: 10/14/99 Date: October 15, 1999
------------------------------- --------------------------------
19
GUARANTY
Location: 3200 Cobb Parkway, SW, Atlanta-Galleria/Cumberland, Georgia
---------------------------------------------------------------------
As an inducement to Promus Hotels, Inc. ("Licensor") to execute the above
License Agreement, the undersigned, jointly and severally, hereby
unconditionally warrant to Licensor and its successors and assigns that all of
Licensee's representations in the License Agreement and the application
submitted by Licensee to obtain the License Agreement are true and guarantee
that all of Licensee's obligations under the above License Agreement, including
any amendments thereto whenever made (the "Agreement"), will be punctually paid
and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment required of Licensee under the Agreement. Without
affecting the obligations of the undersigned under this Guaranty, Licensor may
without notice to the undersigned extend, modify or release any indebtedness or
obligation of Licensee, or settle, adjust or compromise any claims against
Licensee. The undersigned waive notice of amendment of the Agreement and notice
of demand for payment or performance by Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations hereunder existing
at the time of death, and the obligations of the other guarantors will continue
in full force and effect.
The Guaranty constitutes a guaranty of payment and not of collection, and each
of the guarantors specifically waives any obligation of Licensor to proceed
against Licensee on any money or property held by Licensee or by any other
person or entity as collateral security, by way of set off or otherwise. The
undersigned further agree that this Guaranty shall continue to be effective or
be reinstated as the case may be, if at any time payment or any of the
guaranteed obligations is rescinded or must otherwise be restored or returned by
Licensor upon the insolvency, bankruptcy or reorganization of Licensee or any of
the undersigned, all as though such payment has not been made.
This Guaranty shall be governed and construed under and in accordance with the
laws of the State of Tennessee.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
Apple Suites, Inc.
/s/ C. Douglas Schepker By: /s/ Glade M. Knight (Seal)
- --------------------------------- ------------------------------
Glade M. Knight, President
20
ATTACHMENT A - PERFORMANCE CONDITIONS
CHANGE OF OWNERSHIP
I. CONSULTATION. Licensee or its representative(s) shall meet with Licensor at
a location selected by Licensor, within 30 days following the date of
Licensee's receipt of a request from Licensor for consultation and
coordination with the project manager assigned to Licensee by Licensor.
II. WORK AND PURCHASE REQUIREMENT. Attachment C, the Product Improvement Plan
(the "PIP"), is incorporated by reference, attached to and made a part of
this Agreement. Licensee shall perform the renovation and/or construction
work and purchase the items described on the PIP (the "Work") on or before
the completion date specified on the Rider. Whether or not indicated on the
PIP, the Work shall include Licensee's purchasing and/or leasing and
installing all fixtures, equipment, furnishings, furniture, signs, computer
terminals and related equipment, supplies and other items which would be
required of a new Homewood Suites licensee under the Manual and such other
equipment, furnishings and supplies as may be required by Licensor in order
to operate the Hotel. Licensee shall be solely responsible for obtaining
all necessary licenses, permits and zoning variances required for the
Hotel.
III. APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR. Licensor shall have the
right to approve the architect/engineer, general contractor and major
subcontractors for the Work. The Work shall not commence until such
approval has been granted, which approvals may be conditioned on bonding of
the contractors. Prior to commencement of the Work, if requested by
Licensor, Licensee shall submit to Licensor, resumes and financial
statements of the architect/engineer, general contractor and any major
sub-contractors for the Work and such additional information concerning
their experience and financial responsibility as Licensor may request.
IV. APPROVAL OF PLANS. On or before the Plans submission date specified on the
Rider, Licensee shall submit to Licensor, Licensee's plans and
specifications and drawings for the Work, including the proposed
furnishings, fixtures, equipment and signs (collectively, "Plans") for
approval. Licensor may supply Licensee with representative prototype Guest
Room and public area plans and schematic building plans as a guide for
preparation of plans and specifications for the Hotel. Once Licensor has
approved the Plans, no change shall be made to the Plans without the
advance consent of Licensor. In approving the Plans, Licensor does not in
any manner warrant the depth of its analysis or assume any responsibility
for the efficacy of the Plans or the resulting construction. Licensee shall
cause the Hotel renovation and/or construction to be in accordance with
this Agreement, the approved Plans, the Manual and the PIP.
V. COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before the
date specified on the Rider and shall continue the Work uninterrupted
(except for interruption by reason of events constituting force majeure)
until it is completed. Notwithstanding the occurrence of any events
constituting force majeure, or any other cause, the Work shall be completed
and the Hotel shall be furnished, equipped, and shall otherwise be in
compliance with this Agreement not later than the date specified on the
Rider. Licensor shall have the sole right to determine whether the Work has
been completed in accordance with this Agreement, the approved Plans, the
Manual and the PIP.
VI. INSPECTION. During the course of the Work, Licensee shall, and Licensee
shall cause the architect, engineer, contractors, and subcontractors to
cooperate fully with Licensor for the purpose of permitting Licensor to
inspect the Hotel in order to determine whether the Work is being done in
accordance with this Agreement and shall provide Licensor with samples of
construction materials, etc. as Licensor may request.
VII. REPORTS. Licensee shall submit to Licensor each month after the date hereof
(or more frequently if Licensor shall so request) a report showing progress
made toward fulfilling the terms of this Agreement.
Section A-1
VIII. ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING. Licensee
shall order, purchase and/or lease and install all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related equipment,
supplies and other items required by Licensor, this Agreement, the
approved Plans, the Manual and the PIP.
In accordance with the Manual and such other instructions as are furnished
to Licensee by Licensor, Licensee shall cause to be hired a staff to
operate the Hotel, and all such personnel shall be trained as required by
the Manual. All costs and expenses incurred directly or indirectly in
hiring and training such staff shall be paid by Licensee, except as
expressly provided otherwise in the Manual.
IX. COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost of
the Work, including the cost of the plans, professional fees, licenses and
permits, equipment, furniture, furnishings and supplies.
X. LIMITATION OF LIABILITY. Notwithstanding the right of Licensor to approve
the Plans, the architect, engineer and certain contractors, and to inspect
the Work and the Hotel, Licensor shall have no liability or obligation
with respect to the Work, or the design and construction of the Hotel,
as the rights of Licensor are being exercised solely for the purpose of
assuring compliance with the terms and conditions of this Agreement.
Licensor does not undertake to approve the Hotel as complying with
governmental requirements or as being safe for guests or other third
parties. Licensee should not rely upon Licensor's approval for any purpose
whatsoever except compliance with Licensor's then prevailing standards
and requirements of the Manual.
XI. CONDITIONAL AUTHORIZATION. Licensor may conditionally authorize Licensee
to continue to operate the Hotel as a Homewood Suites hotel even though
Licensee has not fully complied with the terms of this Agreement. Under
certain circumstances, Licensor may suspend services to the Hotel
(including reservation services) while the Work is being performed by
Licensee.
XII. PERFORMANCE OF AGREEMENT. Licensee agrees to satisfy all of the terms and
conditions of this Agreement, and to equip, supply and staff the Hotel in
accordance with this Agreement and to cooperate with Licensor in
connection therewith. As a result of Licensee's efforts to comply with the
terms and conditions of this Agreement, Licensee will incur substantial
expense and expend substantial time and effort. Licensee acknowledges and
agrees that Licensor shall have no liability or obligation to Licensee for
any losses, obligations, liabilities or expenses incurred by Licensee if
this Agreement is terminated because Licensee has not complied with the
terms and conditions of this Agreement.
Section A-2
ATTACHMENT B
RIDER TO LICENSE AGREEMENT
1. Name and Address of Licensee: Apple Suites Management, Inc.
Attn: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
2. Location of Hotel: 3200 Cobb Parkway, SW
Atlanta, Georgia 30339
3. Number of Approved Guest Rooms: 124
4. Effective Date of License: October 5, 1999
It shall be a condition precedent to the validity of
this Agreement, and this Agreement shall be of no force
and effect and Licensee shall have no rights hereunder
unless and until on or before October 5, 1999, Licensee
shall have submitted to Licensor, written verification,
in a form satisfactory to Licensor, that Apple Suites
REIT Limited Partnership has closed on the purchase of
and obtained possession and control of the Hotel
("Closing"). Within five days of Closing, Licensee shall
submit to Licensor (i) a copy of the deed, as recorded,
transferring the Hotel to Apple Suites, Inc., (ii) a
copy of the lease agreement between Licensee and Apple
Suites, Inc., and (iii) the franchise application fee in
the amount of $55,800
5. Term of License to Expire: October 4, 2019
6. Plans Submission Dates: as required under the Product Improvement Plan
(Attachment C)
7. Construction or Work Commencement Date: October 5, 1999
8. Construction or Work Completion Date: within 90 days of Closing but not later than January 5, 2000
9. Offer Expiration Date [Paragraph 17]: October 15, 1999
10. Ownership of Licensee: Apple Suites Management, Inc. 100%
Stockholder:
Glade M. Knight 100%
Section B-1